Everything you need to know about Value Added Tax in Nigeria, including registration, calculation, and filing requirements.
What is VAT and who pays it
Value Added Tax (VAT) is a consumption tax charged at 7.5% on the supply of goods and services in Nigeria. It is the end consumer who ultimately bears the cost, but registered businesses collect it on behalf of FIRS and remit it monthly. If your business supplies taxable goods or services, understanding VAT is not optional.
When to register for VAT
You are required to register for VAT if your annual turnover exceeds N25 million. Even if your turnover is below that threshold, you can register voluntarily. Registration gives you the ability to charge VAT on your invoices and claim input VAT credits on purchases. Register with FIRS and obtain your TIN before you begin charging VAT.
How to calculate VAT
VAT is calculated at 7.5% of the taxable value of the goods or services. If you sell a service for N100,000, VAT is N7,500 and the total invoice is N107,500. When you purchase from a VAT-registered supplier, the VAT you paid (input VAT) can be deducted from the VAT you collected (output VAT). You only remit the difference.
Filing your VAT returns
VAT returns must be filed monthly with FIRS. The deadline is the 21st of the following month. So for January transactions, you file by the 21st of February. Late filing attracts penalties. Your return must include total sales, total purchases, output VAT, input VAT, and the net VAT payable. FIRS now requires e-filing through their online portal.
Exempt and zero-rated supplies
Not everything attracts VAT. Basic food items, medical supplies, educational materials, books, and exported goods are exempt or zero-rated under Nigerian law. If you supply exempt goods, you cannot charge VAT and you cannot claim input VAT credits. Review the VAT Act and consult a tax professional if you are unsure about your specific products.
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